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Weekly Muni Snapshot | 11 January 2021

Municipal New Issuance: The first week of 2021 had around $2.2 billion in negotiated issuance. The two most notable deals for the week were the $450 million Denver City & County School District, followed by the $350 million New Jersey Economic Development Authority Social Bonds which AmeriVet was a Co-manager one. This was the Garden Sates first time issuing social bonds which saw huge demand for its bonds as it was well over subscribed. Bonds in the deal saw huge changes in price as the bonds maturing in the short end moved by 15 basis points while bonds maturing in 30 years saw changes by 20 basis points. This doesn’t come to a surprise as demand for bonds has been robust as the negotiated calendar was very light for the past few weeks.

Municipal Secondary Trading: The first week of trading for the new year had roughly $27.6 billion in secondary trading which was almost doubled the amount we saw the prior holiday shortened week of $15.6 billion. With a smaller than average primary calendars many traders focused most of their attention to new issue markets this week. With the increase in secondary trading, we did see an uptick in client’s bids-wanted with amount that totaled to roughly $2.7 billion which still just below average but an increase from the prior two holiday shortened weeks.

Municipal Spread: Municipal bond yields for the first week on 2021 saw them rise as the Bloomberg 10-year benchmark yield rose by 6.5 basis points to 0.751 %, the biggest rise we have seen in a couple of months. This rise in yields went in tandem with Treasuries as we got the results of the Georgia Senate run off. With the rise in yields all across the municipal curve we did see the gap between short-term and long-term bonds rise by 5 basis points to 137 basis points moving back to where we were one month ago. Although, municipal bond yields rose for the week they continue to out perform treasuries as the state and local debt maturing in 10 years is now yielding 66.51% making them the most expensive versus Treasuries on record.

Although, municipal bond yields rose this week the muni-Treasury ratio continued to fall as Treasuries yields moved higher than municipal bond yields. This week the 10-year benchmark municipal bonds became the most expensive they have ever been versus Treasuries as they are now yielding abut 66.51% of treasuries of the same maturity. With Democrat’s making a clean sweep in the elections, muni-treasury yield ratios can still test new lows due to the possibility of direct aid for states and local governments is more apparent as it will usher in a larger economic stimulus package if we had a split government.

Municipal Supply: This week the negotiated calendar will have roughly $3.86 billion an increase from the prior few weeks issuers come back to the market from having a few weeks off. The largest notable issues for the week will the $442 million Pennsylvania Turnpike Commission followed by the $340 million Cook county of Illinois Refunding Bonds.